Basically, a budget involves allocating the amounts of money you need to sustain your cost of living, your wants, plus any unforeseen “emergency” expenses, as well as setting aside money for investing. The definition of a budget is keeping track of your income and how much of your income you save and spend. The basic idea is to put you in a position where you do not spend more money than you earn. One part of managing your personal finances is budgeting - the creation of a structured plan outlining income and expenses. So it is not only a matter of how much you earn, save or invest, but also how you come to a state where you are content with what you have. Even wealthy people deal with money problems and financial stress - it is something that everybody can relate to. Studies have indicated that their personal finances are among the main causes of stress for adults. Therefore, it is important to learn money management skills from early on and to regularly analyse your personal finances.
The main goal is to have a clear picture of your expenses in order to set money aside for saving and investing.įrom something as insignificant to buying your morning coffee to taking out a mortgage, every single day we are faced with financial decisions.
Personal finance involves evaluating your income, your financial needs and allocating your money to necessary expenses on a regular basis. Managing your money is necessary for living a self-determined and secure life, whether you are planning for your retirement fund or saving up for a car. Personal finance is about managing your money to meet your personal financial goals, usually over a long period of time – basically your whole life.